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What Special Problems Face Small Business

Small firms (with, say, less than 500 workers) are often faced with the problems of limited capital. This has a number of side-effects. It means first that they are unable to benefit from economies of scale. Bank managers will be less inclined to lend those funds and will charge them higher rates of interest when they do.

People will be prepared to buy shares in well-known compa­nies. They will not want to buy securities of any sort from small unknown companies. Whereas large firms can threaten to with­draw their business, if debts owing to them are not settled on time, they tend to be regrettable slow on paying their own bills.

An engineer may set up a firm using his technical skills as the basis of the business. As the business grows, his defects as a market­ing manager, accountant and personnel manager will begin to ap­pear. He cannot be an expert in all sections of the business, nor can he afford to consult his larger competitors.

The small firm is also unlikely to be able to afford sophisticated^ technological equipment such as a mainframe computers or visual display, however useful they might be. Advertising cost spread out over a large number of units may be insignificant, but given a small­er level of output they prove an intolerable burden. Inevitably, tel­evision advertising tends to be a resource available only to the larg­er concerns.